Markets brace for potential upside surprise in Australia’s core inflation measure, which could sway RBA policy decisions.
Australia’s May monthly consumer price index, due Wednesday, is expected to show trimmed mean inflation rising to 3.5-3.6% annually. The Reserve Bank of Australia closely monitors this measure for policy signals, with a print above this range potentially reinforcing a hawkish stance or rate hike consideration at its next meeting.
Headline inflation is forecast to diverge, likely falling month-on-month due to fuel price declines. However, underlying pressures persist, particularly in services and housing, with new dwelling costs flagged as a key upside risk. Construction pipeline pressures and data center build-outs are competing for labor and materials, adding to inflationary concerns.
The AUD and rate futures will react sensitively to any upside surprise in the trimmed mean. A fuel excise extension, if confirmed, could further complicate the inflation outlook for the third quarter.